Trade body: EU still providing illegal subsidies to Airbus

Jamey Keaten

May 15, 2018 - 11:15 AM

GENEVA - A World Trade Organization panel ruled Tuesday that the European Union continues to provide illegal subsidies to plane-maker Airbus, the latest in a string of tussles between the European manufacturer and U.S. rival Boeing.

The decision by the WTO's appellate body comes as the Trump administration has exerted intense pressure on the Geneva-based organization over what the president alleges is its "unfair" treatment of the U.S.

The appellate body maintained an earlier WTO ruling that EU "launch aid" provided to Airbus had resulted in lost sales for Boeing in the twin-aisle and very-large aircraft markets. The ruling, which rejected some U.S. claims, was a relative U.S. victory on the question of EU aid for two aircraft: Airbus' 350XWB — a rival of Boeing's 787 — and the double-decker A380, which has eclipsed the Boeing 747 as the world's largest commercial passenger plane.

The WTO panel found that Airbus hasn't been in compliance with some of the trade body's rules since 2011. The decision means the U.S. can now ask an arbitrator to determine how much it can retaliate against the European bloc for failing to comply — raising a new question about how much Washington may recover from the EU through retaliatory tariffs.

Boeing alleges the EU has doled out more than $22 billion in illegal subsidies to Airbus, saying in a statement that the stage is now set for "the largest-ever WTO authorization of retaliatory tariffs" as early as next year. The Chicago-based plane maker didn't immediately indicate how it came up with that estimate.

The Trump administration appeared ready to call on the arbitrator to step in.

"This report confirms once and for all that the EU has long ignored WTO rules, and even worse, EU aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue," U.S. Trade Representative Robert Lighthizer said in a statement. "Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products."

The ruling centres on actions taken by the EU generally, as well as four of its member states: Britain, France, Germany and Spain.

Deciding on a case first opened in 2004, the appellate body found Airbus had paid a lower interest rate on financing to develop the A350XWB than the European plane-maker would have gotten in the open market. It also upheld a ruling by the WTO's compliance panel that the launch aid continued to exist after Dec. 1, 2011, the day that the EU was supposed to comply under a previous decision.

The EU appears set to argue that the only penalty it should face would be on the difference between the market rate for the financing, and the rate that Airbus actually received from the EU.

Boeing's top executive appeared to praise the ruling, and said it was time for "all parties" to work for "the mutual health of our industry."

"Today's final ruling sends a clear message: Disregard for the rules and illegal subsidies is not tolerated," Boeing Chairman and CEO Dennis Muilenburg said. "The commercial success of products and services should be driven by their merits and not by market-distorting actions."

European Trade Commissioner Cecilia Malmstroem insisted that the ruling also rejected "the vast majority" of U.S. claims against it, while saying in a statement that the bloc "will now take swift action to ensure it is fully in line with the WTO's final decision in this case."

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